Castle Group aims to expand by end of 2009

The company intends to add contracts in Vietnam and Thailand

The Honolulu-based holding company of Castle Resorts & Hotels has an aggressive growth strategy for the upcoming years, despite a credit crunch that is affecting the expansion plans of major companies nationwide.

2007 loss:
$1.1 million

2006 gain:
$400,000

Castle Group Inc., which posted a loss of $1.1 million last year, intends to add 15 more resort properties in Southeast Asia by the end of 2009, company representatives said yesterday.

Despite a loss of $1.1 million last year, the Honolulu-based holding company for Castle Resorts & Hotels is forging ahead with an aggressive expansion plan into Asia.

Castle Group Inc. intends to add 15 more properties to its management portfolio in Southeast Asia -- including resorts in Vietnam and more in Thailand -- by the end of 2009, company representatives said yesterday.

While other companies are scaling back, Castle intends to maintain a rapid growth strategy overseas, breaking into new markets such as Vietnam.

The company currently manages 26 properties, totaling more than 3,200 hotel and condominium units in Hawaii, Saipan, Guam, Micronesia and Thailand.

"We have substantially increased the size of our business, furthered our international expansion ... and have reestablished the company's stock into the publicly trading markets," said Alan Mattson, chief operating officer.

The company expects to sign a number of new contracts for properties in Thailand and Vietnam in the upcoming months.

Despite a credit crunch that began last summer, the company won six new contracts for properties in Hawaii, Guam and Thailand, nearly doubling the total number of units last year as compared to year-end 2006.

Castle last year added two luxury hotels in Thailand to its portfolio, as well as contracts for the Ocean Resort Hotel Waikiki, Hotel Santa Fe on Guam, Maile Sky Court and Queen Kapiolani Hotel in Waikiki.

"We're not seeing any indications of the credit crunch," said Howard Mendelsohn, chief financial officer. "We're financing a majority of the growth with cash flow from ongoing operations."

Castle's overall net loss of $1.1 million, or 12 cents per share, last year compares to a nearly $400,000 profit, or 4 cents per share, in 2006.

Total revenue rose 8 percent to $21 million in 2007 from $19.5 million the previous year.

Year-over-year revenue derived from properties increased 6 percent to $18.4 million last year, while management and service revenue grew 21 percent to about $2.2 million, reflecting new contracts gained last year, an increase in rates and occupancy and the strength of the New Zealand dollar, the company said.

Administrative and general expenses increased by $1.6 million last year, partly due to the costs of Castle's ongoing expansion into Thailand and other Pacific Basin and Asian destinations.

The company also incurred legal, consulting, accounting and related costs to begin actively trading its common stock on the Over the Counter Bulletin Board in December.

Castle recorded an expense of $954,459 last year to adjust the value of receivables owed by Hanalei Bay International Investors in a lawsuit settlement with a timeshare developer of the Hanalei Bay Resort.